Punitive Damages

July 30, 2018

There’s a compelling (yet terrifying) new “must-see” documentary now streaming on Netflix called “The Bleeding Edge.” Here’s the Los Angeles Times’ lead paragraph about it:

If body-horror auteur David Cronenberg had dramatized any of the nightmarish stories in Kirby Dick and Amy Ziering’s medical documentary “The Bleeding Edge,” you wouldn’t hesitate to call it a fright film. Such is the grim impact of this investigative, wince-inducing examination of the $400 billion medical device industry, which routinely sends FDA-approved products into the marketplace for use on and in patients without any rigorous clinical safety-testing on humans.

One of the stories involves Johnson & Johnson’s “heavily sold, under-scrutinized gynecological product — vaginal mesh that hardens, causing horrible pelvic damage, and in one couple’s instance, cutting the husband’s penis during intercourse — getting such devices removed (when they were intended to be permanent) can be as undefined and risk-laden a decision as leaving them in.”

Not exactly, because of Tort Reform. It’s a $683 billion industry and they paid off $200 million in settlements. They can factor that in. That’s the collateral damage: We might have to settle because it’s a bad product. We might have to pay $500 million, but we made $683 billion. We’re good.

The types of “tort reform” to which she may be referring are limits on punitive damages. Punitive damages,“are awarded to hold reckless companies accountable through imposition of significant financial liability.… They are one of the most critical tools to stop and remedy egregious corporate misconduct."

As the Center for Justice & Democracy wrote in its 2011 study, “What You Need to Know About … Punitive Damages,"

Despite the fact that punitive damages are supported by some of our nation’s most respected free-market economists (many of whom are politically conservative), and have been around for centuries and are often a stronger deterrent than the criminal justice system, they remain under attack. In the last few decades and even this year, corporate lobbyists and court decisions have rendered punitive damages’ deterrence power meaningless, often by disconnecting punitive remedies from a company’s wealth.…

The size of a punitive damages award shouldn't be dictated by politicians sitting in a state capital. It is supposed to depend on,

…widely varying factors determined on a case-by-case basis — factors like the nature of the misconduct involved and the amount that the judge or jury determines is necessary to get a company’s attention, which is precisely what makes punitives so effective.… [J]uries know that to a multi-billion-dollar company … even a million-dollar punitive damages award is barely a slap on the wrist, creating no financial pressure on the company to create a safer design.…[L]imiting punitive damages to a predictable amount of money undermines their deterrent force in the civil justice system.…

To put it another way, when laws cap or limit punitive damages, as they do in many states, the type and amount of misconduct in which a large company like J&J may engage becomes, simply, a cost of doing business.

Juries are generally very smart about punitive damages. Just this month, a St. Louis jury hit J&J with a punitive damages award of over $4 billion for putting asbestos in its talcum powder, which caused ovarian cancer in its customers. One of the jurors told the St. Louis Post-Dispatch, that it “arrived at that figure by multiplying a recent talcum powder yearly sales total by the roughly 40 years since the company said its products were free of asbestos.” Smart.

But now come the “twists.” Writes the paper, "Johnson & Johnson vowed to appeal the verdict. The company also is likely to file a motion invoking a cap on punitive damages of five times compensatory damages, although Holland said Friday that the constitutionality of that Missouri cap had never been fully tested."

Indeed, Missouri’s cap on punitive damages was struck down as unconstitutional in 2014, but that ruling only covered some claims. It also is not uncommon for judges, on their own, to reduce or reverse large punitive damages award. And then there’s the U.S. Supreme Court, which sometimes takes its own swipes at large punitive damage awards – although not always.

But that’s not the only trick up J&J’s sleeve as it tries to wiggle out of responsibility for the hell it has caused its victims. There's another legal maneuver they will pull, called “personal jurisdiction.” Specifically, "On June 29, a Missouri appeals court tossed out a South Dakota woman’s award of $55 million in another St. Louis trial, saying Missouri courts lacked jurisdiction because neither she nor Johnson & Johnson had the necessary connection to the state. Only five plaintiffs in Thursday’s case are from Missouri …."

One thing’s for sure, however. The frustration we feel about all this is nothing compared to what the victims and their families must feel, some of whose stories are covered in The Bleeding Edge. Let’s hope J&J is finally on the hook for some of the misery it has caused its loyal customers.

September 24, 2015

Today, the American Legislative Exchange Council (ALEC), the secretive group run and funded by big corporations that subsidize the involvement of conservative state lawmakers, officially launched a new website about its model legislation to immunize corporate lawbreakers. Coincidently, we just received a copy of this “confidential memo” from the Volkswagen diesel cheating crisis management team. I know. What are the odds?

2. We show that we’re no different – in fact, probably better - than the rest of the bottom feeders that make up the auto industry. (Hey, how’s this worse than Henry Ford II calling airbags “a lot of baloney.”) DONE.

3. We get with that U.S. group, the American Legislative Exchange Council (ALEC). I know, ALEC is so tainted that 120 companies have already quit. But let’s face it. Only a truly scorned organization can relate to what we’re going through right now. So I just buried ALEC’s enormous corporate membership fee in the $7 billion budget we think we need “to win back the trust of our customers.” Now let me show you why this is an excellent investment that will save us billions in the long run.

But before I do, let’s admit there are a few things we can’t do much about. We got caught by U.S. environmental regulators (and researchers from West Virginia, of all places.) This is terribly ironic since we don’t do much diesel car business in the U.S. Our European friends barely regulate us, making it a whole lot easier to cheat. Had we just stayed out of the U.S., we’d be golden. Although I have to say, U.S. auto safety enforcement is generally laughable and the U.S. Justice Department doesn’t care much either. To be honest, we weren’t terribly worried. But the EPA? Now that was a surprise. I just found out that ALEC basically wants to repeal all U.S. pollution laws. (Hope the Pope doesn't find out.) If we only knew about ALEC sooner!

But now that we do, the timing couldn't be better. This week, ALEC officially launched a web site about what state lawmakers can do to immunize corporate lawbreakers like us. Can you feel a smile coming on?

Although the U.S. Department of Justice will probably just slap our wrists, we’re deathly afraid of private actions brought by state Attorneys General and class actions by angry customers. These have already begun. Turn’s out that ALEC’s top civil justice priorities are bills to ensure these very cases never get anywhere. It’s as if ALEC was reading our minds!

ALEC’s model bill “would effectively eliminate the critical private enforcement provisions that give these laws their power.… [It] is actually a wrecking ball to destroy one of the building blocks of consumer protection, namely the private enforcement of state unfair and deceptive practices acts. It does this by systematically weakening each and every provision of these laws, such as lower burdens of proof, special damages, and attorney’s fees, that were designed to provide consumers with access to justice for small economic wrongs.

One of my absolutely fav’s is this provision: “in no event may any action be brought under this chapter more than [four (4)] years from the first instance of the act or practice giving rise to the cause of action.” We started cheating six years ago! How'd they know? That’s just spooky.

And there’s more. This bill contains a complete ban on punitive damages. And here’s what I love about ALEC. They propose not only limiting punitive damages in consumer protection cases. They have an entire bill aimed at limiting punitive damages in any kind of case brought by people we harm. This kind of law is incredibly important to corporate lawbreakers like us. It means civil damages will never threaten our bottom line, and we’ll be just fine even if we keep harming people.

Then, ALEC wants to make class actions impossible to bring, so hundreds of thousands, or perhaps millions of victims, can’t join together in a lawsuit against us – even though we stuck the exact same cheating software in every single one of their cars. Just look at the hurdles and burdens their bill would place on our (likely ex-) customers. They'll all have to hire their own attorney and go through the time and expense of proving their cases one by one by one (which we expect they'll never do.) Any one of these provisions alone could immunize us, but several dozen? This bill is a true embarrassment of riches.

And those lawsuits by State AG’s? ALEC’s bill would make it nearly impossible for states to hire outside counsel to help, which could prevent many cases from going forward at all. You can read more about that bill here. And should any of our cars have product defects that lead to car crashes and injuries (or deaths), ALEC has a variety of options to immunize us there, as well.

And here’s what else I love about ALEC. Everything they do is entirely behind closed doors. They kick reporters out of meetings. They tell members of the public “NO” when they ask to participate in ALEC activities.

So you see why we must join ALEC today. We’ve broken the law. We’ve harmed a lot of people. This is an organization just for victims like us!

September 16, 2015

In many ways, the new Huffington Post/Highline "DocuSerial" focusing on the unlawful conduct of drug giant Johnson & Johnson, comes as little surprise to us. Our own blog, ThePopTort, has regulatory covered J&J's many corporate offenses including the company's illegal promotion of its schizophrenia drug, Risperdal. That is the subject of the first in the HuffPo/Highline series, explaining how J&J has pushed its salespeople to promote Risperdal illegally to children and the elderly. The drug has horrible hormonal side effects for children and can be lethal for the elderly.

J&J's misconduct would have remained largely hidden had it not been for lawsuits against the company by those injured or made sick. Indeed, this case illustrates one of the most important functions of civil lawsuits: public disclosure of information. Yet the article also crystalizes how one of the other critical functions of litigation - deterrence of unsafe practices - seems to have been upended. These days, a company making $20.6 billion can, "break the rules with relative impunity, or at least without suffering the kind of punishment that would actually hurt."Keep reading.

February 11, 2015

I love New Mexico – Land of Enchantment, powerful history, gorgeous landscape, blue meth. And of course this week, I’m thinking about lawyers (although not necessarily the dedicated folks at the New Mexico Trial Lawyers Association). My thoughts are more consumed with one particular ethically-challenged fake NM attorney named Jimmy McGill, aka Saul Goodman, Attorney at Law. And now it turns out, there’s an even more ethicially-challeged attorney to fill my thoughts today. His name is Senator Ted Cruz (R-TX), and unfortunately, he’s real.

David Corn at Mother Jonesbroke a story today about Sen. Cruz that would be unbelievable if not so common. Certainly the Senator qualifies to join our esteemed list of “Hypocrites of Tort Reform.” (John Boehner received our last shout out.) But the Cruz story is so much more. It’s really one of the worst cases of “tort reform” hypocrisy that we’ve ever seen.

As a policy advisor to George W. Bush's, a Senate candidate and a Senator, Ted Cruz “championed tort reform” (to put it mildly.) For example, writes Corn,

When Cruz ran for Senate in 2012, his website declared he had defended a landmark pro-business tort reform law passed in Texas in 2003 that severely constrained the ability of consumers to sue medical professionals and nursing homes and to collect punitive damages in other cases.… After becoming a senator, Cruz told the Austin Chamber of Commerce that Texas-style tort reform—which places a cap of $750,000 on punitive damages—ought to be a national law.

Yet, as a lawyer in private practice, Cruz—at least twice, in 2010 and 2011—worked on cases in New Mexico to secure $50 million-plus jury awards in tort cases prompted by corporate malfeasance. These are precisely the kind of jury awards that the tort reform Cruz has promoted would abolish. That is, Cruz the attorney, who sometimes billed clients $695 an hour, made money defending jury awards that Cruz the politician wanted to eliminate—and he did so at the same time he was running for Senate as a pro-tort-reform candidate.

Notes Corn, “The two cases Cruz worked on were gruesome.” One involved a nursing home resident who bled to death due to neglect. The case was against “Ohio-based ManorCare Inc., one of the largest for-profit operators of nursing homes in the nation, for wrongful death."

The jury found that the nursing home had been negligent and awarded Barber's family $53.2 million, with $50 million of that in punitive damages. This was one of the largest jury awards in the history of New Mexico.

When ManorCare Inc. appealed and challenged the punitive damages award, Cruz came in to help the family and defend the award, which he did in writing. The case settled before he had a chance to argue it.

His next case involved a civil case brought on behalf of “a profoundly mentally and developmentally disabled man—he could not speak or effectively use his limbs—[who was] was raped, presumably by an employee at the Roswell group home where he lived and which was operated by the New Mexico subsidiary of ResCare Inc. (RCI), a Louisville-based health services firm.… The jury slammed RCI and the subsidiary, awarding $4.95 million in compensatory damages and a whopping $49.2 million in punitive damages.”

Again, the company appealed and Cruz came into the case arguing in favor of the award. Wrote Cruz and his team, “[A] large punitive damages award is justified by the need to deter conduct that is hard to detect and often goes unpunished."

The filing Cruz helped write echoed an argument often used by consumer advocates and plaintiffs attorneys who oppose tort reform and claim it protects companies that seriously harm people, especially the elderly and infirm: "Restoring the punitive damages awarded by the jury in this case is crucial if there is to be any hope of deterring companies like RCI from engaging in reckless conduct against vulnerable individuals.”

For the appeal, Cruz's main task was to sway three appeals court judges during oral arguments. On November 15, 2011, Cruz took time off from his Senate campaign to appear in an Albuquerque courtroom to argue for Selk and the $54 million jury award.…

The appeals court, Cruz told the judges, was obliged "to respect the jury's finding," regarding the substantial punitive damages, which, he noted, represented only 3 percent of RCI's gross revenue. Toward the end of his presentation, he put it plainly: "The purpose of punitive damages is to punish and to deter…The jury rightly concluded the appropriate amount to punish and deter was $48 million."

Yup. Again, “the case was settled before the appeals court reached a decision.” And here’s where the real hypocrisy comes in. Continues Corn,

If either the Selk or Barber case had been brought in Texas, the noneconomic damages could not exceed $250,000, according to Paula Sweeney, a Dallas attorney and former president of the Texas Trial Lawyers Association. “These jury verdicts would not be possible in Texas,” she says. And, Sweeney notes, the tort reform in Texas that Cruz supported has created serious obstacles to even filing such lawsuits. (In 2006, the American Bar Association Journal noted that "Texas plaintiffs layers have been leaving in droves from nursing home and medical malpractice litigation in the wake of tort reform.") Under Texas tort reform, Sweeney points out, a victim (or relative) cannot ask a jury to hit a corporation with tens of millions in punitive damages, as Cruz in the Selk case contended is necessary to deter serious wrongdoing.

See more here, here about how bad things are in Texas. Corn sums things up this way:

In the courtroom—when he was being paid—Cruz was an articulate and forceful champion of super-size punitive awards, insisting such lawsuits and punishments were needed to protect consumers from reckless corporations that put profits ahead of people. On the campaign trail—when he is trying to score political points and draw the support of the business community—Cruz has embraced tort reform that disempowers consumers and protects negligent companies from such penalties. So what does Cruz truly believe? It might depend on whether he is trying to win cases or win elections.

February 05, 2015

In 2000, the late Washington Post journalist David Broder spoke to the Cato Institute about his recent book, Democracy Derailed: Initiative Campaigns and the Power of Money. He said some interesting things, like: the initiative process was imported from Sweden a century ago, it worked for about 25 years leading to important progressive legislation, and “from World War I until the famous Proposition 13 in 1978, it was not a dominant form of lawmaking.” Who knew?

A main purpose of initiatives was, as Broder notes, “to break the power of interest groups.” But as they say, the road to hell is paved with good intentions.

The Center for Public Integrity has some new figures out about the amount of corporate money dumped in 2014 state initiative campaigns. They note, for example:

In 2014, two [California] initiatives attracted considerable cash. Propositions 45, on insurance rate approval, and 46, which would have raised the state’s cap on medical malpractice damages and forced doctors to be drug tested, faced more than $90 million worth of opposition from insurers, hospitals and doctors.…

Anthem [which shelled out $12.8 million against Proposition 45] was aided by other health industry organizations also willing to give millions. Kaiser Foundation Health Plan, another of California’s largest health insurance plans, gave $12.4 million to defeat both 45 and Proposition 46.

Giving tens of millions of dollars to ballot measure contests was worth the investment for the health care companies, according to Wendell Potter, a former insurance executive-turned-whistleblower who writes an opinion column about health care for the Center for Public Integrity.

“These insurers have enormous amounts of money,” he said. “The largest companies make billions of dollars in profits every year. They have the money to spend, and they’re quite willing to spend it to prevent any legislation or regulation that they have reason to believe might in some way cost them money or have a negative impact on profitability.”

So I wonder what they’re going to do about this problem: Right now a tax loophole permits companies “to save millions of dollars by deducting any court-ordered punitive damages as an ordinary business expense. The result, critics say, is that taxpayers are in effect subsidizing corporate misconduct.” For example:

The rating agency Standard & Poor’s, which was accused of helping to cause the financial crisis with its inflated assessments of mortgage investments, is eligible to deduct half of the $1.37 billion settlement with state and federal prosecutors it agreed to this week, according to the U.S. Public Interest Research Group, a consumer-oriented nonprofit. The result would be a roughly $245 million reduction in its tax bill, the research group calculated.

At least 80 percent of the more than $42 billion that BP has paid out because of the 2010 Deepwater Horizon rig explosion that killed 11 people and spewed oil into the Gulf of Mexico qualifies for a tax deduction, according to U.S. PIRG. That has saved an estimated $10 billion to $14 billion for the company. The exact amount is uncertain because of the lack of transparency, the group complained.……

The same day in 2013 that JPMorgan Chase announced a $13 billion deal with the Justice Department, for example, the bank’s chief financial officer emphasized that $7 billion of the total would be deductible. And $11.63 billion of Bank of America’s record $16.65 billion settlement in August is eligible for a tax break, experts said.

Now, some in Congress on both sides of the aisle - and the White House - are trying change the law to prevent this outrage. In fact, writes Kelly Philips Erb at Forbes,

The President’s proposal would disallow a deduction for punitive damages paid or incurred by the taxpayer, whether upon a judgment or in settlement of a claim. If covered by insurance, damages would be included in the gross income of the insured.

My prediction: I stashed this under small business because while this is a clear swipe at corporate taxpayers like Bank of America who are perceived as having taken advantage of existing rules that allow deductions for damages, it could have significant consequences for small businesses. This could pass with some modifications.

November 06, 2014

Some of this was expected, of course. The minute it became clear that “tort reformers” would control both Houses of Congress, the U.S. Chamber of Commerce – representing the largest and most detested industries in the world – announced who qualified for its “first victim” status. Those would be: sick and dying asbestos victims, and anyone who brings a civil rights, employment, environmental or consumer case.

The Chamber’s tort reform wing, the Institute for Legal Reform, says it is hopeful “that a Republican-controlled Congress would move on litigation reform built on bills including the Furthering Asbestos Claim Transparency Act and the Lawsuit Abuse Reduction Act, which both passed the House in 2013.”

The asbestos bill would delay and, in some cases, end up completely denying compensation to people suffering from lethal asbestos-related diseases. The New York Times editorial board called the bill “misguided,” saying it would “make it harder for plaintiffs injured by asbestos to get fair compensation.”

The other Chamber bill would make Rule 11 sanctions mandatory rather than discretionary, taking us backwards to a system that proved to be unworkable, unfair and unnecessary, and was thus abandoned 20 years ago. See more in this 2013 consumer group letter to Congress.

So clearly, we have a fight on our hands, as we will over a few more abominations they will surely try during the next two years. This will likely include proposals for a national $250,000 cap on non-economic damages for medical malpractice, nursing home and drug cases. A bill containing such a cap passed the House in 2012 despite some Tea Party opposition.

Beyond that, we don’t know what to expect, except we know one thing for sure: there’s no limit to the imagination of corporate miscreants when it comes to finding new ways to immunize themselves from civil and criminal wrongdoing.

Take, for example, this new article by W. Kip Viscusi, which Alison Frankel at Reuters headlines, “Blame trial lawyers for GM ignition switch disaster – law prof.” Yup, you read that right. Mr. Viscusi blames GM’s massive cover-up of the ignition switch disaster, which could subject them to punitive damages (not to mention criminal penalties) on things like past discovery of the 1973 Ivey memo, uncovered in litigation. In this memo, GM engineer Edward Ivey evaluated the cost to GM of “burned deaths” from a horrendous fuel tank defect and determined that it was cheaper for GM not to fix the cars and to simply pay for killing people.

In other words, when General Motors engineer Ray DeGeorgio more recently ordered an ignition-switch part change, something which senior management says it didn’t even know about (if you can believe them), that’s the fault of the people who were killed, whose families sued to find out what what happened, and who then uncovered the defect themselves, supposedly alerting senior management for the first time.

As bizarre as Viscusi’s idea sounds, we’re fully aware how companies seeking immunity will use such nonsense to turn corporate wrongdoing on its head and argue for immunity. Mr. Viscusi proposes the following:

To address the inherent challenges proposed by risk analyses and at the same time to encourage companies to think systematically about safety, it is desirable to give company legal protections so that the content of the risk assessments cannot be used against them in trials.…

One might easily envision that over time there might be a rationale for stronger versions of such a proposal. There could, for example, be a regulatory compliance defense against lawsuits alleging negligence for the particular design choice if the company’s analysis met government standards, and the company adopted designs that passed a benefit-cost test.

By the way, if you’re a corporate wrongdoer who hates the thought of punitive damages, Vicscusi has definitely established himself as your “go –to” guy. Check out this 1999 article:

In 1998, Exxon funded Harvard Law Professor W. Kip Viscusi to look into the issue of punitive damages. Viscusi obliged, and wrote an article, "The Social Costs of Punitive Damages Against Corporations in Environmental and Safety Torts," for the Georgetown Law Journal advocating the abolition of punitive damages.

In a footnote to the article, Viscusi discloses that the research for the article was funded in part by "a grant from the Exxon Corporation."

But Viscusi will not say how much Exxon paid him.

Asked how much money he received from Exxon, Viscusi's first reply is, "I don't even know."

"I have several projects," Viscusi says. "This is one paper I did, but I'm working on several other things."

Asked how much he received in total from Exxon, Viscusi replies, "I don't remember that either."

Asked whether he received more than one check from Exxon, Viscusi responds: "Yes, but it was for different projects that overlap the time period."

Asked whether he can give a ballpark figure of how much money he took from Exxon, Viscusi says "no," arguing that the information is not public information.

Viscusi says that he received money from Exxon just in 1998.

Finally, when pressed again as to why he won't reveal the amount of money he took from Exxon for the research on punitive damages, Viscusi responds bluntly -- "It's none of your business."

September 11, 2014

Punitive damages can be a tough sell. Juries award these kinds of damages to hold reckless companies and others accountable for outrageous misconduct. Yet (or so), they are easy rhetorical targets. “Huge” “arbitrary” and “costly to society" are how Big Business groups like to describe punitive damages. But do the facts tell a different story? Actually, they tell a very different story.

Punitive damages are rarely awarded and are modest in amount: awarded in only about 3 percent of successful tort cases. And the median punitive award to tort plaintiff winners isn’t in the millions – it’s only about $55,000. (See more here.) What’s more, appellate judges are cutting them back left and right. Just this week, the 7th Circuit severely reduced a jury award against ConAgra Foods, saying it “does not have to pay nearly $100 million in punitive damages stemming from the explosion at an Illinois grain bin that severely burned three workers.”

Even in the case against BP for causing the 2010 Deepwater Horizon explosion and oil spill in the Gulf, while the court just found BP to be reckless and grossly negligent, he said, “based on previous rulings in the U.S. Fifth Circuit Court of Appeals, which includes Louisiana, BP cannot be held liable for punitive damages under maritime law.” He also noted, however, that “in other circuit courts, BP could be held liable for punitive damages, in addition to compensation for losses.” (Here we go, U.S. Supreme Court!)

When Ms. Lewellen, a 77-year old widow, needed a new vehicle after the transmission on her van went out, she visited National because she had seen several of National’s advertisements for vehicles with a $49-per-month payment plan. Upon arriving at the dealership, Ms. Lewellen told one of National’s employees that she was interested in the $49-per-month payment plan, and she picked out a 2002 Lincoln that qualified for the program. Throughout her visit, Ms. Lewellen repeated that she could afford to pay only $49 per month for a vehicle.

Well, you can just guess what happened. After a few months, she started being hit with monthly bills of $387 - almost 8 times what she was promised. Writes the Court,

When the money from National was expended and Ms. Lewellen became unable to make her payments in full, she contacted Harris Bank to explain the situation and continued to make the $49 monthly payments. Harris Bank eventually repossessed Ms. Llewellyn’s vehicle and sued her for breach of contract.…

Ms. Lewellen presented evidence of 73 complaints against National and Mr. Franklin’s other dealership filed with the Missouri attorney general and numerous similar complaints filed with the Kansas attorney general.

Based on these reprehensible facts, a jury ordered Franklin to pay her $1 million in punitive damages, but a lower court judge cut them in half because of the cap. The state Supreme Court said that was wrong. The cap violated the right to trial by jury - firmly established in Missouri’s constitution for well over a century.

April 05, 2012

We kinda feel like Eliza Doolittle today. (The character - not the pop singer.) Who knew that one day, our scrappy little blog would blossom into a source for a new, impeccably researched academic study called “The empirical effects of tort reform,” written by Cornell Law School Professor Theodore Eisenberg, one of the “foremost authorities on the use of empirical analysis in legal scholarship.” (The article will soon make it into the Research Handbook On The Economics Of Torts (Jennifer Arlen, ed.))

The article focuses on “three central objects of tort reform: punitive damages, medical malpractice, and products liability.” There’s so much good and useful stuff in here that we’ve decided to go a little long with our post today. Here goes (and see if you can find us!):

The Business Community Promotes Myths about the Tort System.

“Through advertising and propagation of incomplete or distorted information, interest groups such as the U.S. Chamber of Commerce and the American Medical Association obscure the status of both the legal system and primary actors’ behavior.”

A Good Example of this Distortion Concerns Punitive Damages.

Business groups often mention punitive damages as an area of concern (e.g., U.S. Chamber of Commerce 2008) and punitive damages have been perceived as so problematical as to lead the Supreme Court to impose constitutional limits, using controversial substantive due process principles, as well as federal statutory limits (BMW of North America, Inc. v. Gore; State Farm Mut. Auto. Ins. Co. v. Campbell; Exxon Shipping Co. v. Baker).

But, “[t]he attention punitive damages receives is disproportionate to their real world impact.” Specifically, “[t]he rate at which punitive damages are awarded has been stable over time… No study shows punitive damages being systematically awarded in inappropriate cases.” Also, “[a] central question is whether caps on punitive damages or Supreme Court decisions have affected the punitive-compensatory relation.” The available evidence says “no.”

And here’s where we come in – we’ll just give you the whole, fascinating paragraph:

The absence of change in the punitive-compensatory relation is consistent with a punitive damages crisis having been largely a social construct of entities like the U.S. Chamber of Commerce. The construct was reinforced by understandable media emphasis on large awards and further fueled by experimental research, never reconciled with realworld data (Eisenberg et al. 2002), funded by ExxonMobil Corporation (Sunstein et al. 2002) to mitigate Exxon’s liability related to the 1989 Exxon Valdez oil spill. It is consistent with the U.S. Supreme Court’s recognition that claims of out-of-control punitive damages have been exaggerated (Exxon Shipping Co. v. Baker 2008). And it is consistent with the reaction of the U.S. Chamber of Commerce when its survey of state court systems was shown to be inaccurate with respect to punitive damages (Eisenberg 2009). Rather than fix its survey, or admit that prior results were misleading, the Chamber stopped asking its respondents about punitive damages (U.S. Chamber of Commerce 2010). The Chamber’s questionable behavior prompted the extraordinary response of a judiciary defending itself against unsupported characterizations (PRNewswire 2010; The Pop Tort 2010).

Moving onto medical malpractice. There’s a lot here, but we’ll just pull out a few interesting tidbits:

Patient Safety is Already Suffering Because Too Few Patients Sue.

One possible factor contributing to the continued high rate of errors is that doctors do not expect to bear the full cost of harms caused by their negligence. Studies of medical error consistently find that the vast majority of patients injured by medical error do not file a claim (Weiler et al. 1993; Sloan et al. 1995; Andrews, 2006). Those that do sue often do not recover. Beyond this, hospitals do not bear the full costs of the harms caused in them even though hospitals directly and indirectly influence patients’ risk of medical error (Mello et al. (2007)).

There Ain’t No “Lawsuit Lottery” in Medical Malpractice Cases. Actually, this is really no surprise. As we have noted, even Victor Schwartz, General Counsel of the American Tort Reform Association, admits this. But the empirical studies also show, “[t]he overwhelming evidence is that the legal system’s disposition of medical malpractice claims is strongly associated with the quality of medical care. Claims of a lawsuit lottery are unsupported.”

Also noted is how those who argue that the system is flooded with frivolous lawsuits deceptively interchange the terms “claims” and “lawsuits” to try to make their case:

Thus, misleading impressions about the medical malpractice system, such as the AMA’s statement that “75 percent of medical liability claims are closed without a payment to the plaintiff” (AMA 2006) depend wholly on failing to distinguish between weak cases, which tend not receive payment, and strong cases, which every study shows to receive payment at a higher rate than that suggested by the AMA. Distinguishing between the two groups of studies is important because a claim presented to an insurer is not the same as a lawsuit. And claims against multiple defendants may lead to recovery from only one, leaving three claims without a payment but an incident with evidence of negligence.

Business and Medical Lobbies Could Care Less About the Continuing Drop in Med Mal Lawsuits.

Yet campaigns for medical malpractice reform persist in states with declining filings (e.g., New York Senate Bill 2011). And the Pacific Research Institute, a freemarket group, ranks Connecticut as 38th in a medical-tort index ranking states, New York as 43rd, Oregon as 39th, and Rhode Island as 49th (Graham 2010). As noted, however, NCSC data show a decade-long decline in malpractice filings in each of these states. Connecticut filings declined by 30 percent, New York filings by 1 percent, Oregon filings by 42 percent, and Rhode Island filings by 34 percent.

“Tort Reform” Interferes With Patient Safety Incentives.

Evidence suggests that greater savings to hospitals and insurers can be achieved not at the expense of patient victims. … Caps that reduce premiums by brute force likely discourage more painstaking but socially desirable efforts to improve safety.

“Tort Reforms” Actually Lead to An Increase in Claims “Severity.”

The effect of caps and other reforms may help explain increasing awards in medical malpractice cases that reach trial. The number of lawsuits decreases, as suggested by NCSC filing data, but caps require attorneys to be more selective about the cases they accept. …This greater selectivity and need for greater damages to accept a case likely contribute to the increasing observed mean and median medical malpractice awards in cases that do reach trial. Garber et al. (2009) used a survey of 965 plaintiffs’ attorneys to assess whether noneconomic damages caps and attorney fee limits affected access to justice for medical malpractice victims. They concluded that caps and fee limits make it harder to retain counsel.

“Tort Reform” Provides Little in the Way of Health Care Savings.

One recent summary concludes that the “accumulation of recent evidence finding zero or small effects suggests that it is time for policymakers to abandon the hope that tort reform can be a major element in healthcare cost control” (Paik 2012, 175).

There is No Link Between C-Sections and Liability.

On balance, the available evidence does not support a consistent association between liability pressure and increased cesarean rates. Increased cesarean rates can be attributable to factors other than liability pressure and studies with reasonable control groups of physicians without liability pressure tend not to find an association.

There is No Link Between Liability Premiums and Access to Care.

If increasing premiums drive exit decisions, then programs alleviating premiums should have effects. But Smits et al. (2009) surveyed all obstetrical care providers in Oregon in 2002 and 2006. Cost of malpractice premiums was the most frequently cited reason for stopping maternity care. An Oregon subsidy program for rural physicians pays 80 percent of the professional liability premium for an ob/gyn and 60 percent of the premium for a family or general practitioner. Receiving a malpractice subsidy was not associated with continuing maternity services by rural physicians. Subsidized physicians were as likely as nonsubsidized physicians to report plans to stop providing maternity care services. And physician concerns in Oregon should be interpreted in light of the NCSC finding, described above, that this was a period of substantial decline of Oregon medical malpractice lawsuit filings.

Medical Education Must Address the Brainwashing of Doctors. (This is truly of my favorite findings.)

A bizarre aspect of the medical malpractice reform debate is the recognition that doctors grossly misperceive the system, accompanied by recommendations to change the system to cater to their misimpressions. Rather than educate doctors about reality, one reads of proposals to change the system to cater to physicians’ misperceptions (Hermer and Brody 2010). It seems preferable to include a reasonable medical education requirement focusing on how the legal system operates in medical malpractice cases rather than to curtail the current liability system that is widely recognized as underenforcing standard-of-care norms.

Business Group Propaganda is Polluting the Product Liability Issue. Some fascinating findings here.

Some branches of science are so distorted by interest-group research and socially constructed knowledge that the actual safety and efficacy of products can be difficult to prove, hampering objective assessment of both the products liability system and of changes in it. While misuse of scientific evidence by plaintiffs can occur in product liability cases (In re Silica Products Liability Litigation 2005), the pharmaceutical (DeAngelis 2000; Drummond 1999), energy (Sunstein et al. 2002), asbestos (Egilman et al. 2003), tobacco (Glantz et al. 1996), welding rod (Morris 2008), and other industries suppress some research and fund other research, sometimes without attribution of funding, that can be misleading or incomplete....

Both states that enacted reforms during 1979-1989 and states that enacted no reform during that period had significant declines in plaintiff success rates during the period. Tort reform efforts, including social construction of knowledge, likely adversely affected plaintiffs even in states that did not enact reforms (Eisenberg and Henderson 1992, 776). Tort reform efforts, such as anti-liability publicity campaigns, thus may be more important than reforms themselves.

Liability considerations were a sufficient condition or a contributing factor to at least fourteen important auto safety improvements, including inadvertent vehicle movement, fuel tank design, occupant restraints, and all-terrain vehicle restrictions. The chemical industry is reported to have made significant safety improvements as a result of liability exposure. Ashford and Stone (1991) found that liability pressure stimulated the development of safer products and processes and spurred technological innovations that reduced chemical hazard risks (367-68). They conclude that tort reforms are misplaced because significant under deterrence existed. Johnson (1991, 452) concludes, “The claim that the product liability system unduly compromises the chemical industry is not well supported by the evidence.” Pharmaceutical company attorneys credit liability pressure for safety improvements. One company attorney regarded the liability crisis as largely a myth. “I believe––though it’s heretical––that the liability crisis is largely a myth when one looks at the available information such as the actual number of cases” (Swazey 1991, 297). This industry attorney concluded that tort reform proposals exceed what may be needed to address flaws in the system.

September 14, 2011

Gosh, the news has been grim lately. There are shocking levels of poverty in this country and it is only getting worse. SAT reading scores have fallen to the lowest level on record. Some people cheer at the notion that someone without health insurance should be left to die. Economist Paul Krugman tells Steven Colbert that our economy is “functionally like the Depression.”

Actually, I think it’s more like our brains are functionally in a depression. I know some people are thinking that a few Tanqueray martinis might be in order but I just heard about a better, healthier solution: just laugh! Who knew?

There is a new study out about how “the physical act of laughing” itself makes us feel good. Writes the New York Times, “The simple muscular exertions involved in producing the familiar ha, ha, ha … trigger an increase in endorphins, the brain chemicals known for their feel-good effect.”

We do our best at ThePopTort to find humor in a pretty dry topic – the tort system. Bor-ing! So we at least try to mock sanctimonious hypocrites whenever we can.

For example, well-know chemical company Dupont has made no secret of the fact that they dislike being sued or paying punitive damages for causing environmental disasters, which Greenpeace says “continue to jeopardize the lives of about 9 million Americans.” For example, in 2008 we reported that Dupont would be heading straight to the appeals court to challenge a judge’s ruling that Dupont had engaged in:

wanton, willful and reckless conduct in its operation of the [zinc] smelter in the small town of Spelter, [West Virginia]...Among other things, DuPont was ordered to pay $196.2 million in punitive damages to residents who claimed the company downplayed and lied about health threats from arsenic, cadmium and lead in the air, water and soil for decades.

The company has also made it part of its political mission to push for laws that cut off the legal rights of everyday Americans. For example, they are a member of the disturbing corporate coalition called the New Jersey Lawsuit Reform Alliance, whose sole mission is to eviscerate the legal rights of New Jersey residents.

But today, this company took a little break from fighting jury verdicts and went ahead and got one for itself. In fact, some might even call it an eye-popping verdict - more than $919 million - after it sued a South Korea company for one of those life-or-death trade secret violations involving a Dupont fiber. It’s the third-largest jury verdict on record for this entire year, yet still not enough for this profiteering company. Now they want punitive damages too!

If hypocrisy like this makes you laugh, we are happy to have helped you today. If not, well, there’s always Charlie Bit My Finger.

August 02, 2011

In 1994, a powerful new corporate crime fighter appeared on the scene and his name was Crackers the Corporate Crime Fighting Chicken. Crackers actually did most of his work on television – two different TV shows, to be exact: TV Nation (a 2-year summer replacement series that won a 1995 Emmy for Outstanding Informational Series) and later, The Awful Truth, which aired in the spring/summer of 1999 and 2000. Sadly, both series eventually ended and without a TV show to feature his adventures in corporate crime-fighting, Crackers slowly disappeared from the scene. But as we just learned, his work has lived on!

In 1994, while on TV Nation, Crackers visited the Doe Run lead smelter in Herculaneum, Missouri, near St. Louis. This smelter was poisoning kids with lead, which causes brain damage, so Crackers had a bunch of them tested, spoke to company officials, took his findings over to state regulatory officials, and basically exposed the entire mess to a much wider public. You can read more about it here and in the wonderful book, Adventures in a TV Nation. The segment was nomintated in 1996 for an Environmental Media Association award (although sadly for Crackers, the show lost out to one about endangered species - not that there's anything wrong with that.)

But now, all these many years later, the kids in Herculaneum are going to finally get justice thanks to a persistent community, some great lawyers and a jury that seems about as angry about what was done here as Crackers was! As reported by the St. Louis Post-Dispatch:

The mystery Friday afternoon was not whether the jury would punish the Herculaneum lead smelter's former owners for negligently exposing 16 children to harmful lead pollution.

The jury had already said it planned to award punitive damages, on top of a $38.5 million verdict as compensation for health problems and lost lifetime earnings.

The only question still lingering in the St. Louis Circuit courtroom at the end of a three-month trial was the size of that award.

The answer: $320 million.

The amount surprised even the plaintiffs' attorneys. They had suggested to the jury a punitive award that was one-third lower.

"I'm stunned," said Gerson Smoger, a Dallas attorney who worked on the case with St. Louis attorney Mark Bronson.

"They obviously wanted to send a message: Don't choose profits over people," Bronson said. "That's what this case is about."…

This case was just one of many targeting the massive lead smelter in Herculaneum, about 30 miles south of St. Louis. The lawsuits claim former and current owners knowingly exposed residents to lead pollution, a neurotoxin that is especially harmful to children. Plaintiffs' attorneys said their clients, children growing up near the smelter, suffered lost IQ points and other health effects from lead poisoning that the company knew existed and only reluctantly revealed.

This case is the first to reach trial.

No doubt, this jury verdict is bound to brighten Crackers' view of retirement, especially in light of what might happen to his Medicare benefits.

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